Christmas party tax deductible image with tree and party guests

Is Your Staff Christmas Party Tax Deductible?

/0 Comments/in , /by

Everyone loves a good end-of-the-year, holiday celebration. And after the year we’ve had, your staff deserve it. But it’s not as simple as getting a few platters of sushi and throwing open the bar. At least not when it comes to your taxes.

Many Australian businesses mistakenly believe that their staff Christmas party is automatically tax-deductible. Sometimes that might be true. Other times it might not. And in some circumstances, it could be subject to Fringe Benefits Tax (FBT).

So, before you toss the company credit card down for the bar tab believing your staff Christmas party is tax deductible, here’s what you need to know.

Is Your Staff Christmas Party Tax Deductible?

Whether or not the expenses of your staff holiday party are tax deductible or subject to FBT depends on when it’s held, where it’s held, who attends and how much you spend. Likely it’ll be a combination of each of those things. Here are the broad rules.

General Rule

The cost of your staff Christmas party is income tax deductible to the same extent that it’s subject to FBT. Conversely, if you have costs that are exempt from FBT then you can’t claim those as an income tax deduction. So, if you’d like to not pay taxes on your company party, the first step is to try to work it into an FBT exemption. Because unless there’s an exemption, it’s likely that FBT will apply when you putting together a company Christmas party.

When it’s at your office (or property)

Exempt Property Benefits

If you hold the party on your business property, during the working day and only staff attend, then it will be exempt from FBT under the exempt property benefits. But this exemption won’t apply to friends, family or associates.

Minor Benefits Exemption

In the same vein, if you have a Christmas party on your premises and you pay less than $300 per person, that amount will generally be exempted from FBT. This can extend to friends and family as well (as long as it stays under $300 per head). This is the minor benefits exemption.

When it’s at another property

Minor Benefits Exemption

If you hold a party for your staff party off of the premises (so at your neighbourhood pub, or at a nice restaurant overlooking the valley) you lose the benefit of the property exemption. But you can still use the minor benefits exemption for both staff and friends and family as long as the costs don’t exceed $300 per person.

Tax Deductible

However, if the costs exceed the $300 threshold per person, the amounts above will likely be tax deductible. So, if you spend $350 per person on a fancy meal with champagne at a local venue, you can claim back $50 per person. And this applies to friends and family as well.

What about clients?

Unfortunately, the costs incurred entertaining clients are not tax deductible. So, if you decide to include clients at your company Christmas party, you won’t be able to claim the amounts that relate directly to entertaining them.What about gifts?

Staff gifts

Your staff Christmas party is a great time to give each employee a gift. And if you give them a gift that’s less than $300 under most circumstances those costs will be exempt from FBT.

It’s important to remember each gift or party is considered a separate benefit. So, you can throw them a party for less than $300 a person, AND give them a gift valued at less than $300 a person BOTH can be exempt.

Client gifts

Gifts can be a little tricky when you’re giving a to clients, however. This is because we have to decide whether the gift is actually a gift, or will be considered entertainment.

Gifts are things like a gift voucher, a Christmas hamper or a pen. But if you give something like tickets to something (whether it’s a movie, or a concert, or a flight), that’s more likely to be considered entertainment. The former are tax deductible, but the latter are not – regardless of how much you spend.

The divisions between ‘gift’ and ‘entertainment’ can be complicated, so it’s a good idea to speak to your accountant before spending money on Chrissy presents for your clients.

What if you’re a tax-exempt entity?

Tax exempt entities have different rules when it comes to Christmas parties and taxes. These are similar in nature, but have their own spin. For example, a tax-exempt entity can rely on the tax-exempt entertainment exemptions for Christmas parties, and the minor benefits exemption will only apply in very limited circumstances.

It’s best to speak to your accountant about your options if you are a tax-exempt entity.

Takeaway

How you organise your end-of-the-year celebrations and employee and client gifts can see you saving thousands of dollars in taxes (or not!). So, it’s worth taking the time to consider the best way forward before getting out the corporate credit card. You’ll be glad you did.

Get in touch if you’d like some specific guidance on how to save on tax while still having a great night of celebrations. We’re here to help.

image of phone with easy business bookkeeping app

5 Tips for Easy Business Bookkeeping

/0 Comments/in , /by

Cash flow is the number one issue affecting small to medium businesses right now. The Australian Securities and Investment Commission reports that poor cash flow is cited as a factor in 40% of business failures. Yet, 60% of small-business owners feel they are not very knowledgeable about accounting and finance. And many find bookkeeping difficult, overwhelming, hard to prioritise or just plain tedious.

Whether you don’t know what to do, or don’t like doing it, it’s essential that, as a business owners, you keep on top of your books. Doing this helps you to understand and manage your cash flow and keep your accounts up to date. And that puts you at less of a risk for cashflow difficulties and, ultimately, business failure.

But doing your books doesn’t have to be hard, overwhelming or even tedious. Here are five tips for easy business bookkeeping that can help you understand your cash flow and keep your business in the black.

5 Tips for Easy Business Bookkeeping

TIP 1: Schedule it in 20-minute bursts.

Many business owners put off doing their bookkeeping. Often it’s for very legitimate reasons, like a lack of time while they service their own clients. Or because it just seems confronting and overwhelming.

But the more you delay in doing your books, the more the work snowballs. And then it truly can become overwhelming (and, frankly, unbearable).

Instead, set yourself 20-minute targets. Input transactions a couple of times a week (you can even do it while you’re waiting for dinner to cook, or watching Netflix) and stick with that schedule. When you’re working consistently in short bursts you can actively manage and track your finances, including cash flow, in very little time. And it prevents that work from building up.

TIP 2: Review your reports monthly.

Reviewing your reports is part of good bookkeeping. But it’s sometimes hard to get to it. Schedule in a time once a month to take a quick look at those reports. Look for anomalies like uncategorised expenses or bank accounts that are in the negative on your balance sheet.

You’ll also want to ensure that put in all of your expenses and that your bank statement and accounting records match. And check your net profit and your cash flow statements so you can see both how much profit you made in the month, and your liquidity position.

TIP 3: Keep your business and personal finances separate.

Keeping your business and personal finances completely separate halves the amount of work that you need to do. Instead of rifling through all your accounts and pulling out the business related transactions or expenses, all the information will be contained in separate files.

If you use any budgeting or accounting software, ensure that you have one for your personal and one for your business finances as well. And maintain separate bank accounts. These steps will make your business expenses and income easier to track and your profit and loss and cashflow, easier to manage.

TIP 4: Invest in an accounting program.

Accounting software has come along in leaps and bounds. In fact, every year there are new systems. Because there are so many options now, that means that there will be a system that does the things you need at a price point you can afford.

Accounting software makes it easy to quote for work (so increase your sales) and send out invoices (so increase your cashflow management). It also makes it easy to catalogue your receipts, enter incoming payments, reconcile your accounts and generate reports. And most systems are accessible via an app on your mobile. So now you can do your books no matter where you are.

TIP 5: Hire a specialist.

When it comes to your books, the most important thing is to just get the work done. If it just isn’t working any other way, if you simply can’t find the time to do it, there are many excellent bookkeepers here in Australia, and many at quite affordable rates.

The information that you can get from your books is invaluable to understanding and managing your finances (including cashflow) and keeping your business up and running. Ignoring it, won’t make it go away. But it could end up in disaster for your business.

For more easy business bookkeeping tips, get in touch. We’re here to help.

Man carrying heavy bag on his back with words Year End Tax Planning Tips

Year End Tax Planning Tips for 2020

/0 Comments/in , /by

30 June is fast approaching, and most of us are starting to think about our tax returns. Of course, no one likes to pay more tax than they have to. So, we’ve put together some year end tax planning tips that will help you keep more of your money at tax time.

Year End Tax Planning Tips for 2020

Prepay Business Expenses

Prepaying some of your expenses for the coming financial year while you’re still in this financial year can save you money. This can be things like your rent, insurance, subscriptions to any professional associations and even interest on bank loans (where your terms allow). You can deduct a full year’s worth of the coming year’s expenses this year.

This is definitely something to consider if you’re a business who anticipates a larger than normal tax bill for this year.

Consider Personal Deductible Super Contributions

Consider topping up your super contributions. You can contribute up to $25,000 in deductible super contributions each year, and it’s a great way to both save, and save on taxable income.

To  claim a deduction for personal superannuation contributions you need to complete an  intention to claim with your superannuation fund and receive a letter back confirming the tax-deductible amount. You’ll need to provide a copy of this letter at the time of lodging your tax return in order to claim a deduction.

Super Contributions Timing

If you’re thinking about taking advantage of super contributions, don’t leave it too late. The tax office doesn’t consider a contribution to be made until the amount is actually credited to a super fund’s bank account. So, an electronic transfer to another bank account on 30 June is not necessarily considered paid. Make sure you do these two weeks or so before the year end to be safe.

Make Donations

Donations are a great way to save some money at tax time. But in order for your donations to be tax deductible, it must meet a few requirements.

  1. It must be made to Deductible Gift Recipients;
  2. It needs to be $2 or more;
  3. You cannot receive a material benefit in exchange for the donation;
  4. It must meet any applicable conditions; and
  5. You must keep a record.

Read more about how to meet those requirements here.

Purchase Plant and Equipment

Take advantage of the $150,000 instant asset write-off. It will allow you to deduct business assets (new and used) purchased from your assessable tax.

Write Off Bad Debts

Review bad debts for any that are absolutely unrecoverable. Writing these off before 30 June will enable you to claim them as a deduction.

Home Office and Working from Home Expenses

The ATO has always encouraged employees who spend some time working from home to claim certain work-related expenses as a tax deduction. These expenses can include electricity, cleaning costs, phone and internet, computer consumables (that means printer paper and printer ink, for example), home office equipment, home office furnishings and the costs of repairs to work equipment or spaces.

Since COVID-19, the ATO is now offering a simplified working from home allowance. They’re also still permitting you to claim under the old methods as well. You can read about each method, their benefits and which will work best for you here.

Do A Stocktake

Now is a great time to review your stock and write off any that is damaged or obsolete.

Consider Income Protection

Income protection insurance can be claimed as a tax deduction. It can also provide you peace of mind that your family will be taken care of in the event of something happening to you.

Take Advantage of Depreciation

Write off any obsolete items on your depreciation schedule.

Make and document any trust resolutions

If you’re trading under a trust structure make sure you prepare your trustee distribution resolution minutes prior to 30 June 2020. These resolutions document how the income from the trust is distributed to its beneficiaries, and if it isn’t executed by this date, any default beneficiaries become entitled to the trust’s income and are subject to tax.

Government Subsidies

If you’ve received the Cashflow Boost or JobKeeper payments, they have special rules for tax purposes.

Cashflow Boost

The Cashflow Boost is a ‘non-assessable non-exempt’ income for tax purposes and not reportable on the BAS. So, you need to make sure you don’t include it in your taxable income.

JobKeeper Payments

JobKeeper payments, on the other hand, are assessable income for tax purposes but don’t attract GST. So, for these, you need to ensure you don’t include them at item 1B of the BAS.

Talk to Your Accountant

At the end of the day, the best year end tax planning tips are the ones that work best for you. Talk to your accountant if you have any other questions about strategic tax planning.

We’re here to help if you need any additional information or advice based on your specific situation.

Contact us for your free consultation

JobKeeper Guides

/0 Comments/in , , /by

The JobKeeper payment scheme is a great initiative for Australian businesses. It can help you get through the tough economy brought on by COVID-19. But it’s not always easy to understand. Many people want to know, am I eligible? How do I enrol? Who can I speak to if I’m still not sure? So, we’ve put together easy-to-understand JobKeeper Guides that answer just those questions.

The JobKeeper Guides below provide high-level customised information about JobKeeper payments for each specific entity. They will help you understand your eligibility and give you information on how to enrol so you don’t have to dig through complicated layers of information to find out what applies to you.

JobKeeper Guides

JobKeeper Guide for Employers and Employees

For businesses that have employees.

JobKeeper Guide for Sole Traders

For sole traders without employees.

JobKeeper Guide for Partnerships

For partnerships without employees.

JobKeeper Guide for Trusts

For trusts without employees.

JobKeeper Guide for Companies

For companies without employees.

Enrolments are open now.

We’re here to help if you need any additional information or advice based on your specific situation. The ATO is also willing to work with you. So, even if you don’t think you fit any of these categories, there may be some help available to you.

Contact us for your free consultation

Woman holding change

Are My Donations Tax Deductible?

/2 Comments/in , , , , /by

Tax deductible donations – what are they and will my donations for bushfire relief qualify?

Australians are incredibly generous. This year alone we’ve already donated nearly $500 million dollars towards bushfire relief. But even in years without terrible tragedies, five out of six Aussies give to charitable organisations, with the average annual deductible donations being nearly $650 per person.

While most of us are donating because it makes us feel good to help, it also makes sense to keep track of what we give. Come tax time, tax deductible donations are a great way to keep more of your money in your pocket.

We’re often asked if a donation to a crowdfunding campaign, or to a child’s school will count as a deduction. And now, we’re being asked about bushfire donations. Unfortunately, not all donations are tax deductible.

Donations that are tax deductible

So, what is required to make a tax-deductible donation? There are five requirements.

1. It must be made to Deductible Gift Recipients.

For a donation to be tax deductible it must be made to an organisation that is accredited as a Deductible Gift Recipient or DGR. You can easily find out if the charity you’re donating to is a DGR by checking the Australian Charities and Not-for-profits Commission’s (ACNC) Charity Register.

Most of the big names will be DGRs. Places like the Australian Red Cross, The Salvation Army Australia and WIRES will most certainly have their status as a charity confirmed by the ACNC and all donations to them will be tax deductible.

However, where you might run into trouble are donations to smaller organisations – perhaps local companies that are organising fundraising that they’ll then move on to a larger entity. If the person that you give the money to is not a registered DGR, you won’t be able to claim it on your tax return, regardless of where the money finally ends up.

2. It must be $2 or more.

You can claim the amount of the donation but it must be at least $2. It can be made in the form of money or property as long as the value exceeds the base amount.

3. You cannot receive a material benefit in return.

Your donation must be truly a gift. In other words, you can’t receive or expect to receive any material benefit, advantage or item in return for your donation.

Let’s consider the typical car wash fundraiser. Imagine your son’s cricket team is having a car wash, with all the proceeds to go to bushfire relief. Even if the donations are made straight through to an accredited charity, the money you are giving is not tax deductible because in return you’ve received a great (or not so great) car clean. It’s still a great thing to do – but you can’t claim it on your tax return.

4.Your donation must comply with any applicable conditions.

For some DGRs, tax law adds extra conditions on the types of deductible gifts they can receive. An example of this is when you donate to the Australian Disaster Relief Fund. That donation must be made within two years of the disaster (or from the date the Treasury minister declares).

You can read more about conditions on certain charities on the ATO’s website. Or the DGR that you are donating to will be able to confirm what types of donations they are able to accept.

5.You must have a record.

For every donation you make, you must have a record. In most cases the DGR that you’ve donated to will issue you a receipt. But if they haven’t (and they don’t always) you can simply show your donation on your bank statement, or if you gave via your workplace, your payment summary, your income statement or with a written notification from your employer.

There is one exception to the records rule, and that is for bucket donations. Many of us have popped some change into the red Salvos bucket at an outdoor cinema event, or even in one of the seeing eye dog collection statutes in your local Woolworths. In those situations, you may deduct up to $10 total for contributions without a receipt or record of any kind.

What donations are not tax-deductible

Donations that don’t meet the above five requirements are not tax deductible, and it pays to be on your toes. It’s not always crystal clear when a donation will be permitted especially in terms of receiving a ‘benefit’.

For example, art union or raffle tickets are not tax deductible even though you may not win (and therefore, won’t receive a benefit). Likewise, donating to a Facebook fundraiser organised by your local butcher or directly to family or friends who have been affected by bushfires won’t be deductible.

Going forward

Clearly there are more reasons than just tax deductions to make donations. But if you’re making a large donation, or donating often, it pays to ensure you can use these on your income tax return. That means you’ll feel good both when you donate, and at tax time.

Have questions about your tax deductible donations? We’d love to help you with some personalised advice. Get in touch!

ATO’s Bushfire Relief and Tax Assistance

/0 Comments/in , , , /by

ATO bushfire relief will help over 3.5 million Australians. See what you’re eligible for.

The 2019/2020 bushfires have had a profound effect on Australians. As of 14 January 2020, 18.6 million hectares of land has burned, 30 people and 1 billion animals have been killed and 5,900 buildings have been lost. For those directly affected, it is a tragedy beyond comprehension. The last thing those families and businesses want to be doing is worrying about their tax requirements.

The Australian Taxation Office (ATO) understands this and is offering tax relief and assistance to over three and a half million bushfire victims. This relief ranges from deferments on filing requirements to bespoke solutions and in most cases will apply automatically to those individuals, businesses and self-managed superannuation funds (SMSFs) located within fire affected postcodes.

If you are located in one of the indicated postcodes, or even if you’re not, here are the ATO bushfire relief measures on offer.

Automatic Deferments

The ATO is extending an automatic deferment to bushfire victims for any lodgements or payments due. Due dates are now pushed back until at least 28 May 2020 to lodge and pay business activity statements and income tax returns. This applies whether you manage your taxes yourself or have an agent do it.

You don’t have to do anything to get this deferment. If you’re in one of the indicated postcodes, it’s been extended automatically.

Fast Tracking Refunds

The ATO is also fast tracking refunds to those entities and individuals in the identified postcodes. If you’ve already lodged your return, your fast-tracked refund will happen automatically.

If you haven’t lodged your return yet, it might be worth trying to do it as soon as you can. Even though you don’t have to file, due to the automatic extension, new refunds will be fast tracked as well. And additional cash flow could be very helpful in dealing with your bush fire recovery.

Remittance of Interest and Penalties

If you’ve accrued any interest or penalties during the bush fires, the ATO is [forgiving] those charges. Again, this will happen automatically if you are in an impacted postcode. You don’t need to apply for this, even if you are tax agent.

Reissuance of Tax Documents

For those that have lost homes or places of business, it is likely that you’ve lost your tax documents as well. The ATO will reissue any tax documents that they have on hand.

Tax Debt or Outstanding Obligations

The ATO is putting a halt on commencing new debt recovery actions until 28 May 2020 (at least) for those in affected areas. You can also request a payment arrangement for outstanding debts if you aren’t automatically granted one.

The ATO is taking this a step further, as well, and will consider releasing bushfire victims from income tax and fringe benefits tax debts if they are ‘experiencing serious hardship’.

Tailored Help

The government knows that many who have been affected by the bushfire disaster aren’t necessarily located in one of the identified postcodes. If this is you, don’t let that stop you from seeking help. Ring the ATO’s Emergency Support Infoline on 1800 806 218 and speak to an ATO agent about your specific needs.

The ATO recognises that everyone’s situation is different and knows that there could be situations that warrant additional support or extensions beyond what they have currently offered. For example, there are many businesses whose trade has been significantly impacted by the bushfires, even though they may not have been directly impacted otherwise.

So, even if you don’t fall into one of the above categories, give the ATO a call. They’re standing by to work with you on a case-by-case basis. They’ve made it clear that they will be ‘flexible, reasonable and pragmatic when considering each request on its merits’.

Takeaway

At the end of the day, no one wants to run afoul of their tax and reporting obligations. Now is the time to be focusing on family and community, and the ATO knows that. The tax relief options are designed to help you do just that.

If you’d like more information about ATO bushfire relief, reach out. Our specialists are here to help.

Claiming work-related motor vehicle expenses tax deduction

/0 Comments/in , /by

If you use your own car for work-related travel (even if you are leasing or hiring it), you may be entitled to a work-related motor vehicle expenses tax deduction. Even if you use your car part time for work reasons, and part time for personal reasons, you can claim the work related portion of your car expenses. However, you have to keep track of that use.

There are two methods currently available to claim motor vehicle expenses tax deductions – cents per kilometres and the logbook method.

Logbook Method (extracted from ATO’s website)

  • Your claim is based on the business use percentage of the expenses for the car.
  • Expenses include running costs and decline in value but not capital costs, such as the purchase price of your car, the principal on any money borrowed to buy it and any improvement costs.
  • To work out your business use percentage, you need a logbook and the odometer readings for the logbook period (see below).
  • You can claim fuel and oil costs based on either your actual receipts or you can estimate the expenses based on odometer records that show readings from the start and the end of the period you had the car during the year.
  • You need written evidence for all other expenses for the car.

Your business use percentage is the percentage of kilometres you travelled in the car for work during the year divided by the total kilometres travelled by the car during the year.

If the pattern of your car use changed during the year, make a reasonable estimate of your business use percentage for the whole of financial year, taking into account your logbook, odometer and other records, any variations in the pattern of use of your car and any changes in the number of cars you used in the course of earning your income.

Logbook Period

Your logbook is valid for five years. If this is the first year you are using this method, you must have kept a logbook during the financial year. It must cover at least 12 continuous weeks. If you started using your car for work-related purposes less than 12 weeks before the end of the year, you can extend the 12-week period into the next financial year. (But, if you are using the logbook method for two or more cars, the logbook for each car must cover the same period.)

If you established your business use percentage using a logbook from an earlier year, you need to keep that logbook and maintain odometer records. You also need to keep a logbook if the ATO tells you in writing to keep one.

Your logbook must show:

  • When the logbook period starts and ends, and the odometer readings at these times.
  • The total number of kilometres the car travelled during the logbook period.
  • The number of kilometres travelled for work during the logbook period based on the journeys recorded for the period.
  • The business use percentage for the period.

Entries in the logbook for each business trip must be made at the end of the journey (or as soon as possible afterwards) and show the:

  • Date the journey began and ended.
  • Odometer readings at the start and end of the journey.
  • Kilometres travelled on the journey.
  • Reason for the journey.

Your records must also show the make, model, engine capacity and registration number of the car.

Click on the button below to download your log book worksheet:

DOWNLOAD

Takeaway

It’s well worth taking the time to track your work-related car use and claim the motor vehicle expenses tax deduction. To get an idea of what you might save, check out the ATO’s online calculator, or get in touch. We’d be happy to talk you through the process and your potential savings.